1. How does the global landscape look from where you're sitting?
China is an engine of growth that is going to surprise on the upside. The U.S. is still [not very] strong, but stronger, and there, the question is how the fiscal cliff is going to play out. But everything else being equal, the U.S. has actually shown us better numbers in home improvement, housing, job numbers, etc. The fact that Europe, in my view, is going to stop deteriorating is a big positive factor. Within Europe you are going to have areas that are going to do less badly. We've had very intense pressure on some of those countries and things are bad, but for them to get much worse from here it would be quite difficult.
2. What do you like about China?
I have been more positive than most on China. I never believed that China was going into a hard landing, and now that the political transition has taken place [Xi Jinping will succeed Hu Jintao as General Secretary of the Communist party], I am more confident or comfortable that as we approach the March milestone of the ability for the government to take over the economic guidance of the country that we will have more positive moves. People who were forecasting GDP below 7% for 2013 in China will be surprised on the upside.
3. What's motivating that growth?
Toward the end of the year you might see a little bit of tightening indirectly caused by banks calling their clients and paying back loans and things like this, but definitely if you look at what was pulled off a few months ago in terms of investment particularly in infrastructure and railroad industries, these are definitely coming back very sharply.
We'll probably continue to have a very strong growth engines like urbanization. The migrant working population in China is very, very important because if you are a migrant worker you don't have paperwork that allows you to bring kids to school to buy an apartment, etc.
If the next team wants to make urbanization a further growth engine, we could see some interesting changes there: some in terms of land supply reform, financial reform, state or enterprise reform and capital reform. It's not going to be March 31st. It's going to be gradual, but those are the subjects that have been studied for quite some time as various five-year plans in China. That's what we're going to have and that's very positive.
4. Are you seeing opportunity in other emerging markets?
All positioning in emerging markets this year was much lower than it has been in the past, and I would be looking to adding to a position at the right time. We're now getting more interested in Mexico and Latin America. It really depends on the sectors that you're looking at if you look at financials versus consumer stocks etc. We're seeing potential of very strong re-rating of consumer-related or healthcare-related stocks in Brazil but with regards to financial [segments], we like Mexico much better.
5. What areas worry you?
Middle Eastern tension. We can't manage portfolios on small probability, high-risk events. There are a lot of oil stocks we like, but you can't manage to that. You also have the whole geopolitical aspect that is so difficult and is going to take several years to resolve...but you have to be able to react quickly if something, in fact, happens.